Gambling chiefs race for share of U.S. online gaming

Published 11:14 AM ET Sun, 11 Nov 2012

By Sue Zeidler

LAS VEGAS, Oct 3 (Reuters) - Major U.S. casino operators are racing to embrace internet gaming, even in the absence of federal standards, as they gear up to attract younger consumers in a market expected to reach $10 billion a year by 2017.

Some bricks and mortar casinos are teaming with online game developers, and casino executives say they are rushing to put in place safeguards on their own services that would combat fraud, money laundering, underage and compulsive gambling, and players falsifying their location.

"Online gaming is here. Our biggest challenge is converting the 25 to 35 year old to becoming participants in our industry," said Brian Gamache, chief executive of slot machine maker WMS Industries Inc at the annual Global Gaming Expo in Las Vegas.

WMS expects to soon announce partnerships to provide online game platforms to land-based casino operators to help capture the younger market.

The U.S. Justice Department last year declared that only online betting on sporting contests is unlawful, which experts say will allow states to unilaterally legalize some forms of online gambling, from lotteries to poker.

MGM has teamed with developer Playstudios, a company founded by former Wynn Resorts executive Andrew Pascal, to create a platform for online slots, blackjack and other traditional games.

Facebook Inc recently introduced a gaming app in Britain that permits users to play with real money there, where online gambling is legal. Casino executives envision similar partnerships as they race to grab market share of the nascent industry.

"We believe we can make money on this and are embracing it as an opportunity," said MGM chief executive Jim Murren .

"We will not be Amazoned," he added, referring to the drastic impact online sales from companies such as Amazon.com Inc have had on traditional firms.

LEGISLATION HICCUP

Big casino operators would prefer federal standards to regulate online gaming as they would offer a larger, uniform market, while state-by-state legislation could lead to a patchwork of regulations and different tax rates.

However, the prospect of federal solution dimmed this year as Congress adjourned before it could consider a measure backed by U.S. Senate Majority Leader Harry Reid, D-Nev., and U.S. Sen. Jon Kyl, R-Ariz. It would now require quick action during the post-election congressional session.

In the absence of federal regulation, several states are expected to try to boost revenues by legalizing online poker.

Slot machine makers International Game Technology and Bally Technologies Inc said in June they were granted online gaming licenses in Nevada. In separate statements, the two companies said the licenses would allow them to partner with Nevada's casinos to provide online poker and other interactive games through their machines.

Whether or not federal legislation passes in the next year, a majority of officials polled in an American Gaming Association survey released Wednesday envision the U.S. market growing to $10 billion or more over the next several years, from about $4 billion in unauthorised gambling in 2011.

According to the American Gaming Association, about 85 countries have legalized online gambling and an estimated $35 billion is being bet worldwide online each year, including by millions of people in the United States.

"The gambling industry has always done a great job of reinventing itself. To grow again in the U.S., it's critical," Patti Hart, chief executive officer of International Game Technology , said during a panel discussion at the Vegas gaming conference.

Not all casino officials are placing all their bets on the online arena. Michael Leven, president and chief operating officer of the Las Vegas Sands Corp , said the company is taking a more cautious stance.

"We believe that when everyone gets into it, the cost of acquisition will go up and profitability will go down," said Levin. "So it's not going to be a free lunch."